Summer 2018 Market Pulse Aerospace | Defense | Technology | Government Services Public Markets and Valuation Trends Fall Outlook Special Operation Forces (SOF) Update Notable Transactions Public Company Comparables and Recent M&A Transactions Representative ACP Transactions Larry A. Davis Philip J. McMann Mark Shaheen Partner Partner Managing Director (301) 231-6225 (301) 231-6202 (301) 222-8227
[email protected] [email protected] [email protected] 805 King Farm Boulevard, Suite 300 | Rockville, Maryland 20850 | P 301.231.6200 | F 301.231.7630 | aronsoncapitalpartners.com Summer 2018 Market Pulse Aerospace | Defense | Technology | Government Services Public Markets and Contractor Valuation Trends Federal contracting continues to LTM Contractor Returns outperform the broader market, 140 outpacing the S&P 500 by 5% to 20%. 2018 returns are supported by 120 a clearer budget outlook and favorable tax policies. 100 LTM 7/25/2018 Returns Defense Electronics continues to be Defense System/Electronics: 33.6% one of the most valuable industries Mid-Tier: 28.0% Indexed Performance Indexed 80 Aerospace: 20.1% as the Department of Defense Tier-1: 17.8% places significant premiums on S&P: 13.9% 60 high-tech, turnkey solutions to Jul-17 Nov-17 Mar-18 Jul-18 legacy systems. Mid-tier returns have been boosted LTM Contractor Multiples by: 20.0x • ICF (+60% LTM), who has seen 18.0x significant success internationally, 16.0x • CACI (+43% LTM), who beat 14.0x 12.0x analyst earnings expectations by LTM 7/25/2018 Multiples almost 50%, and, 10.0x 8.0x Defense System/Electronics : 17.6x Tier-1: 14.8x • Booz Allen (+31% LTM), who Enterprise EBITDA Value/LTM 6.0x Mid-Tier: 14.2x Aerospace: 13.0x expects to increase earnings by 4.0x over 25% in the next year Jul-17 Nov-17 Mar-18 Jul-18 Aerospace returns were elevated by the Farnborough Air Show where Boeing and Airbus saw a surge in demand for planes.